Will things change this year? There are signs that the real estate market will be improving. Mortgage rates have dropped to around 6.6% for a 30-year fixed rate. The phenomenon of the “mortgage rate lock-in effect” slowed down the real estate market in 2023 which put pressure on inventory levels and home sales.

The sub 5% mortgage interest rates that almost 85% of mortgage holders took during the pandemic have kept homeowners from selling their homes and buying at an elevated interest rate. Most experts don’t expect to see an end to the shortage of homes for sale.

Mortgage rates have fallen for nine consecutive weeks and are expected to drop further although many think it’s unlikely that rates will drop below 6%.

The Federal Reserve’s campaign to lower inflation through rate hikes had a significant impact on the housing market. Now that inflation is easing, and interest rates are falling, it’s likely buyers who have been sitting on the sidelines might get back in the game.

The big question for 2024 is will there be a notable increase in inventory?

CALIFORNIA ASSOCIATION OF REALTORS 2024 PROJECTIONS

Recently CAR reported that Americans are feeling more confident about the housing market at the beginning of 2024 as buyers and sellers are seeing a glimpse of hope at the far end of the tunnel. While rates had a slight uptick in the first week of the year, easing inflationary pressure and a soft economic outlook prompted many to believe that mortgage rates will decline in the next 12 months. The housing market should see a bounce back in activity in the coming months if the market can maintain its upward momentum. The improvement, however, will likely be gradual as the tight housing supply (inventory of homes for sale) remains the norm in 2024.

Mark Danforth Lomas & Kirsten Wolfe * HomesOfSantaBarbara@gmail.com * 805.845.2888

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